Regional escalation pathways in the U.S.-Israel-Iran war

The following analysis draws on source inquiries and ongoing research conducted by our team across the region, and forms part of our broader monitoring of the Iran–Israel–U.S. conflict and its implications for global markets.

Executive Summary

• We are mid-war, not near resolution Incentives across all actors point to a prolonged conflict, with neither Israel nor Iran seeking a quick end and the U.S. unable to exit cleanly.
• Strategic misalignment is driving escalation The U.S. wants de-escalation, Israel wants to maximise long-term damage to Iran, and Tehran is focused on regime survival and regional leverage.
• Energy infrastructure is now the main battlefield Iran is targeting Gulf energy assets as a pressure lever, while Israel has begun responding in kind. This marks a structural shift in the war.
• Strait of Hormuz disruption is the most likely pathway (40%) Continued Iranian attacks on shipping and Gulf infrastructure risk pulling the U.S. deeper into the conflict despite its desire to withdraw.
• Oil market risk is asymmetric and underpriced Limited escalation scenarios keep oil around ~$100, but severe escalation could push prices toward $200 with prolonged market dislocation.
• GCC states are a critical swing factor Gulf countries prefer de-escalation but may shift toward active involvement if energy infrastructure damage intensifies.
• U.S. decision-making is the key uncertainty Washington faces a binary choice: withdraw and accept reputational cost, or escalate further to secure maritime stability and a narrative of victory.
• Worst-case scenario is systemic regional war Full Gulf involvement combined with Iranian escalation would remove remaining guardrails, expand attacks to civilian and global infrastructure, and trigger a sustained global energy shock.

If you would like to discuss any of the findings or explore additional briefings on Iran, Gulf security dynamics or energy market risks, please feel free to contact us.

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